Under New Zealand law (Insurance Law Reform Act 1977, s 11), insurers cannot rely on a policy exclusion unless the excluded event or circumstances caused or contributed to the insured’s loss. The wording of s 11 can be summarised as follows:
• Where a policy has an exclusion because the event or circumstances was likely to increase the risk of loss, then
• The insured does not lose indemnity if, on the balance of probabilities, the actual loss was not caused or contributed to be the excluded event or circumstances.
The case below is an example where s 11 was applied and the insured retained his cover for a motor vehicle insurance claim.
In June 2016, Hameed purchased motor vehicle insurance for a sum insured of $8500. Hameed had recently arrived in New Zealand from India and had an Indian driver’s licence.
In December 2016, Hameed was driving near Taumarunui when he crashed in heavy rain. The crash took Hameed into a roadside fence and he completely totalled his car. Fortunately, Hameed was fine, and subsequent passers-by drove him 40 minutes to the Taumarunui police station in order to report the crash.
The police did not attend the scene of the crash. Because Hameed was the only occupant of his car, on a country road at 9pm, there were no witnesses.
Based on Hameed’s version of events, as well as the weather conditions at the time, and the police officer’s local knowledge of the stretch of road, the police officer noted that the crash was caused by “adverse weather conditions/ environmental factors.”
Hameed submitted an insurance claim. The insurer declined the claim because Hameed had breached the terms of his conditional licence by not travelling with a ‘supervisory’ occupant.
Hameed complained to FSCL.
The insurer’s report noted that the suspected speed at the time of the crash report was 90km/h and the car aquaplaned in excessive surface water. It was also noted that no police attended the scene.
One of Hameed’s licence conditions was that he must be accompanied by a supervisor. The insurer believed that a supervisor would have assisted in guiding Hameed to drive at safe speeds on wet New Zealand roads. The insurer declined Hameed’s claim relying upon the clause in his policy which stated
Hameed is not insured for any loss or damage while any vehicle in connection with which the insurance is granted is being driven by any person who… is not complying with the conditions of his licence
Hameed believed his claim should have been accepted because the vehicle skidded through surface water covering the roadway and the police thought that the crash had been caused by environmental factors rather than by Hameed’s driving. Hameed reasoned that he would have been charged with a driving offence if he had been at fault.
Hameed commented that he had an unblemished driving history in more than 10 years of driving in India and the only reason he was required to have a supervisor in his car was because the one-year allowance for international drivers had expired and he was yet to book to sit the test for his NZ licence.
Hameed believed that the insurer had unreasonably denied his claim.
Review of s11 Insurance Law Reform Act
Hameed argued that section 11 of the Insurance Law Reform Act (ILRA) should apply given the cause of the accident was not the absence of a supervisor, rather extremely poor road conditions.
The insured shall not be disentitled to be indemnified by the insurer by reason only of such provisions of the contract of insurance if the insured proves on the balance of probability that the loss was not caused or contributed to by the happening of such events.
To rely on s11 ILRA Hameed had to prove, on the balance of probabilities, that he did not cause or contribute to the accident by not having a supervisor present. If he was able to prove this then it followed that the insurer could not rely on the exclusion clause.
Upon a review of the information presented to us, we found that Hameed’s lack of a supervisor had not, on the balance of probabilities, contributed to the crash.
There was no indication of drugs and alcohol, or excessive speed being involved in the crash. Moreover, the police decided not to give Hameed an infringement notice. In addition to this, Hameed had been driving in NZ unsupervised for more than a year. It was only after this one-year allowance expired that Hameed was required to be accompanied by a supervisor. Hameed’s previous driving experience (in India) had also been on the left-hand side of the road.
Given all this information, it was inconclusive whether a supervisor would have been likely to have prevented the accident.
After considering our findings, the insurer agreed to pay the claim to the value of the written off vehicle’s worth.
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